Variation of Gini and Kolkata Indices with Saving Propensity in the Kinetic Exchange Model of Wealth Distribution: An Analytical Study

Abstract

We study analytically the change in the wealth ($x$) distribution $P(x)$ against saving propensity $\lambda$ in a closed economy, using the Kinetic theory. We estimate the Gini ($g$) and Kolkata ($k)$ indices by deriving (using $P(x)$) the Lorenz function $L(f)$, giving the cumulative fraction $L$ of wealth possessed by fraction $f$ of the people ordered in ascending order of wealth. First, using the exact result for $P(x)$ when $\lambda = 0$ we derive $L(f)$, and from there the index values $g$ and $k$. We then proceed with an approximate gamma distribution form of $P(x)$ for non-zero values of $\lambda$. Then we derive the results for $g$ and $k$ at $\lambda = 0.25$ and as $\lambda \rightarrow 1$. We note that for $\lambda \rightarrow 1$ the wealth distribution $P(x)$ becomes a Dirac $\delta$-function. Using this and assuming that form for larger values of $\lambda$ we proceed for an approximate estimate for $P(x)$ centered around the most probable wealth (a function of $\lambda$). We utilize this approximate form to evaluate $L(f)$, and using this along with the known analytical expression for $g$, we derive an analytical expression for $k(\lambda)$. These analytical results for $g$ and $k$ at different $\lambda$ are compared with numerical (Monte Carlo) results from the study of the Chakraborti-Chakrabarti model. Next we derive analytically a relation between $g$ and $k$. From the analytical expressions of $g$ and $k$, we proceed for a thermodynamic mapping to show that the former corresponds to entropy and the latter corresponds to the inverse temperature.